Working or on disability, you need retirement plan

Sunday

Nov 29, 2009 at 12:01 AMNov 29, 2009 at 10:42 AM

Dear Debt Adviser: Help! I'm about $30,000 in debt. I have about $50,000 in my retirement account. I will be 59 1/2 in January. I had to go on disability after a fall at work. My house is paid for. Should I take money out and pay off my loan? Could I just hire someone to advise me? I don't know what to do and am at my wits' end. I am not behind on any bills.

Dear Debt Adviser: Help! I'm about $30,000 in debt. I have about $50,000 in my retirement account. I will be 59 1/2 in January. I had to go on disability after a fall at work. My house is paid for. Should I take money out and pay off my loan? Could I just hire someone to advise me? I don't know what to do and am at my wits' end. I am not behind on any bills.

-- Doris

Dear Doris: You worry me. You are nearly 60, have saved little and spent much. Now, you are out of work and ask me if you should hire someone? My suggestion is that you get rehired as soon as possible and develop a plan for building up your savings, paying down your debts and preparing for retirement.

You might be late getting started on a financial plan, but let's start with these four major moves:

• Set realistic goals, such as when you want to retire and how much you will need to do it.

• Put together a budget that will allow you to save the money needed to meet your goals and begin to pay down your debt.

• Find a financial planner to do serious retirement planning.

• Consider how you can use the equity in your home for debt repayment and retirement planning.

A credit counselor can help you with goal-setting and budgeting, a financial planner should do a review of your finances and make suggestions, and a local banker can help you understand what options you have for tapping the equity in your home, such as a reverse mortgage.

You asked if you should use your retirement money to pay off your debt. I don't recommend that you tap into your retirement money at this point. If your disability is permanent, then you need to rebalance your budget to assure that your monthly expenses can be met with your disability income. Should your disability not be permanent, the sooner you can get back to full salary, the better.